The Time-Varying Risk Price of Currency Portfolios

Joseph Paul Byrne; Boulis Maher Ibrahim; Ryuta Sakemoto

doi:10.1016/j.jimonfin.2022.102636

The Time-Varying Risk Price of Currency Portfolios

Joseph Paul Byrne
, Boulis Maher Ibrahim
, Ryuta Sakemoto

Research output: Contribution to journal › Article › peer-review

6 Citations (Scopus)

43 Downloads (Pure)

Abstract

This paper formally implements time-varying risk price models for currency returns. Focusing upon time variation in risk prices, the paper explores four currency risk factors. In addition to dollar and carry factors, we employ momentum and value factors which are widely used by currency investors. We find time variation in risk prices for the dollar factor is associated with the U.S. business cycle, with notable increases at the end of economic downturns. Constant beta models moreover have smaller pricing errors across all currency portfolios, which is in contrast to the stock and bond markets.

Original language	English
Article number	102636
Journal	Journal of International Money and Finance
Volume	124
Early online date	15 Mar 2022
DOIs	https://doi.org/10.1016/j.jimonfin.2022.102636
Publication status	Published - Jun 2022

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 8 Decent Work and Economic Growth

Keywords

Currency Carry Trades, Risk Price, Time-varying Betas, Factor Model, Nonparametric Model

ASJC Scopus subject areas

Economics, Econometrics and Finance(all)
General Business,Management and Accounting

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10.1016/j.jimonfin.2022.102636

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abstract = "This paper formally implements time-varying risk price models for currency returns. Focusing upon time variation in risk prices, the paper explores four currency risk factors. In addition to dollar and carry factors, we employ momentum and value factors which are widely used by currency investors. We find time variation in risk prices for the dollar factor is associated with the U.S. business cycle, with notable increases at the end of economic downturns. Constant beta models moreover have smaller pricing errors across all currency portfolios, which is in contrast to the stock and bond markets.",

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AB - This paper formally implements time-varying risk price models for currency returns. Focusing upon time variation in risk prices, the paper explores four currency risk factors. In addition to dollar and carry factors, we employ momentum and value factors which are widely used by currency investors. We find time variation in risk prices for the dollar factor is associated with the U.S. business cycle, with notable increases at the end of economic downturns. Constant beta models moreover have smaller pricing errors across all currency portfolios, which is in contrast to the stock and bond markets.

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ER -

The Time-Varying Risk Price of Currency Portfolios

Abstract

UN SDGs

Keywords

ASJC Scopus subject areas

Access to Document

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